The Hanover Insurance Group Estimates Q2 Catastrophe Losses of $262 Million

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The Hanover Insurance Group Inc. announced a preliminary estimate for second quarter catastrophe losses of approximately $262 million, before taxes, or 18.5 points of net earned premium.

Second quarter catastrophe losses stemmed from 19 convective storms across multiple states, with hail damage representing the majority of reported losses and primarily affecting the company’s Personal Lines business, the company said in a statement.

Taking catastrophe loss estimates and other currently available information into account, The Hanover expects to report a second quarter combined ratio of 111.3%, and combined ratio, excluding catastrophes, of 92.8%. The Hanover also expects to report an after-tax net loss per basic share of $(1.94) and operating loss per basic share of $(1.91) for the second quarter.

“We experienced significant catastrophe losses in the second quarter, which according to industry estimates, is expected to be the worst second quarter for U.S. catastrophe losses since 2011, and potentially the industry’s costliest quarter for hail losses in history,” commented John C. Roche, president and chief executive officer at The Hanover, headquartered in Worchester, Mass.

“Our CAT losses reflect the impact of severe weather, notably the prevalence and severity of hailstorms in Michigan, where we have our largest Personal Lines presence,” he added. “Excluding catastrophes, our second quarter results are in line with our expectations, due to solid net investment income and strong results in our Specialty and Core Commercial businesses, partially offset by the continuing impact of inflationary trends in Personal Lines.”

“Despite the recent and prevailing environmental challenges, we have every confidence in our ability to achieve our long-term strategic and financial goals, and deliver for all of our stakeholders,” Roche continued.

“We are intently focused on the effective execution of our margin recapture plan and determined to continue adjusting our underwriting and risk management strategies to address increasingly severe weather trends and evolving risks,” he said.

“These measures include taking steps to further improve insurance-to-value ratios, building on risk mitigation and prevention initiatives, as well as implementing changes to product terms and conditions, in particular in homeowners, some of which we expect will come into effect as soon as the third quarter of 2023.”

He went on to say that the execution of the plan to date has resulted in property pricing outpacing expectations in many lines, particularly in homeowners where Hanover “achieved renewal price increases of 22% on average in the second quarter.”

“We were also pleased that the progress we made through our margin recovery plan helped us achieve successful July 1 property reinsurance renewals, allowing us to secure per-risk and catastrophe occurrence treaty structures consistent with the expiring treaties, while at the same time increasing our catastrophe reinsurance limits at a reasonable price,” Roche affirmed.

Photograph: A man drags tree limbs to a pile at the Foxcroft Woods Condominiums, Sunday, April 2, 2023, in Little Rock, Ark. Residents across a wide swath of the U.S. raced to assess the destruction from fierce storms that spawned possibly dozens of tornadoes from the South and the Midwest into the Northeast, killing at least 32 people. (Staci Vandagriff/Arkansas Democrat-Gazette via AP)

Topics Catastrophe Profit Loss

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